Dr Andy Xie SCMP Article: China’s future depends on it getting its microeconomics right

Dr Andy Xie

In his opinion piece for SCMP, Dr Andy Xie shared insights on China’s macroeconomic stimulus and why he believes it is only a temporary boost

Here is an excerpt:

Chinese consumers are generally in good financial shape. The turn away from pursuing property for speculation can only mean a huge improvement in household cashflows. Since 2021, households’ savings deposits have risen by 40.2 trillion yuan (US$5.5 trillion) while debt rose by a much slower 9.4 trillion yuan. In the preceding decade of 2011-2021, the rise in household debt was nearly 85 per cent of the rise in deposits.

Many economists see households deleveraging as bad for the economy. But when people stop financial speculation and start tidying up their balance sheets, it is a good thing. A healthier balance sheet will support more sustainable consumption growth. The boom in domestic tourism shows that, when the product is right and for a reasonable price, demand will come.

The change in Chinese household spending behaviour is an opportunity for businesses that can come up with the right products. China is no longer a bubbly market full of speculators willing to pay stupid money for overpriced products. Businesses need to change to prosper, and this will mean a healthier economy in the long run.

On the demand side, businesses need to cater to a more rational Chinese consumer. On the supply side, businesses must rise in the supply chain to add value and stave off competition with proprietary technologies and unique designs. Semiconductors, electric vehicles and renewable energy are sectors well on that path. Aeronautics and high-value-added ships are on the horizon.

China’s economic model had long been that of working for original equipment manufacturers, or OEMs. This led to a shortage of high-paying white-collar jobs. Tens of millions of graduates can’t find jobs that meet their expectations. But as China’s corporate sector climbs the global value chain to the top, Chinese white-collar workers will have the same opportunities as in other developed economies.

China’s economic future depends on upgrading at the microeconomic level. Its labour force isn’t expanding. Its infrastructure and cities have been built. It doesn’t need to pursue growth for the sake of it. Economic expansion is good only when it meets the higher expectations of the next generation in both consumption value and job quality.

Andy XieDr Andy Xie 謝國忠 is a renowned Chinese economist based in Shanghai who has been named one of the “50 Most Influential Persons in Finance” by Bloomberg.

Andy Xie’s skill and has been tried and tested through the years. He is one of the few economists who has accurately predicted economic bubbles including the 1997 Asian Financial Crisis and the more recent subprime meltdown in the United States.

He joined Morgan Stanley in 1997 and was Managing Director and Head of the firm’s Asia/Pacific economics team until 2006. Before that, Andy spent two years with Macquarie Bank in Singapore an associate director in corporate finance and  five years as an economist with the World Bank. Dr Andy Xie is currently a director of Rosetta Stone Advisors.

Dr Xie earned a PhD in economics in 1990 and an MS in civil engineering in 1987 from the Massachusetts Institute of Technology.

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